Credit Cards - Friend or Foe

Previously: rent, food, utilities, clothes, books and supplies, entertainment

Some people like to make credit cards out to be the greatest enemy to college students learning how to manage their finances. However, I think that credit cards can be a good thing if used responsibly and in moderation. If you can exercise self restraint, then credit cards can very effectively be used to build up your credit history. Having a good credit history is crucial to getting lower rates on your mortgage, student loans, and car loans. College is an excellent time to begin building your credit. Most lenders won't even consider giving you a loan unless you either have at the very least 2 years of established credit or a credit worthy co-signer. What happens if yo can't find anybody to co-sign for you? Well, then you're screwed, especially if you need a loan to pay of your tuition for the semester. That's why you should begin building your credit as soon as possible.

• Think of your credit card as a debit card. Never charge more than you have saved in the bank. At no time should you have a balance greater than what you have in your bank account. Better yet, never spend more than you have budgeted for expenses.
• You don't have to use your credit card every period. Just having the card will help build your credit. Even if you don't use your card, the credit card companies will indicate on your credit report that payments were made on time.
• Check your credit report. You can get one free credit report annually from each of the credit agencies. Don't fall for scam sites, the only site approved by the government is annualcreditreport.com. Go to the ftc website to see how to get your free credit report. You can also request a credit report from the companies if you were denied credit for any reason.
• Never carry charges from one statement period to another. You'll end up struggling just to pay off the interest. A twenty dollar charge for dinner could end up costing hundreds if you don't pay off the debt.
• Don't get a card because of reward gimmicks or because the card has pretty designs. Some people really do get credit cards for this reason...
• Look for a long zero interest intro period, zero annual membership fees, and low apr.
• Never pay just the minimum. This is the amount that credit card companies come up with to keep you in a cycle of barely paying off the interest.
• Pay off your balance before your intro period ends. Depending on your agreement, you may end up paying interest on the original charges, not just the remaining unpaid balance!
• Use balance transfers wisely. You should transfer debt from a high interest card to a lower interest one. Just be sure to read the fine print and try calling in to get the company to waive the transfer fees.
• Never transfer your balances just to avoid paying off the debt! Switching cards all the time will ruin your credit.

• If unfortunately you already have credit card debt...
• Cut up all of your cards. Yes all of them! Don't leave a single one 'just for emergencies'. The temptation is the last thing you need right now.
• Cut your spending so that you have money available to pay more than just the minimum due on your credit cards.
• Concentrate first on paying off your largest balance first, then the next largest and so on.
• Call the companies to negotiate a lower interest rate. Convince them that you're sincere in paying off your debt. They may even stop accruing interest on what balance you do have. The companies would rather you pay off what you currently owe them then to risk collecting nothing if you declare bankruptcy.

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